Adequate funding for its next capital plan is crucial for covering both debt and operations, the chief financial officer of New York’s Metropolitan Transportation Authority said.
“The challenge is funding this major capital program and to the extent that we’re funding it with debt – increasingly with debt,” Robert Foran told members of the MTA board’s finance committee on Monday. “That is going to a challenge we’re going to have to address because we are certainly trying to avoid putting pressure on the farebox because of the debt service.”
The state-run MTA, which operates mass transit in the New York City region, is one of the largest municipal bond issuers with roughly $40 billion of debt. It intends to remarket $185 million of floating rate notes on Wednesday.
The MTA is scheduled to deliver its 2020 to 2024 capital program to a state review board sometime next year. Its current five-year plan is $33.3 billion.
Speaking Sunday night on the CBS-TV news magazine "60 Minutes," Andy Byford, president of the MTA's New York City Transit unit, said it would cost $40 billion over 10 years implement his so-called Fast Forward program designed to modernize the system, one of the nation's oldest.
Speaking before the board's transit committee meeting on Monday, Byford said he would make "a compelling, irresistible case for the city and the state ... and the feds, for that matter. We shouldn't let them off the hook."
New York State Comptroller Thomas DiNapoli warned in an Oct. 11
By 2022, debt service could consume 18.6% of total revenue and 36.5% of fare and toll revenue. Foran said the ratio-to-revenue total now is “roughly 17%, going up. That’s typically the same pattern that we’ve been seeing because we’re conservative in our estimates.”
DiNapoli said the authority is especially vulnerable to an economic downturn.
“The largest risk to the operating budget may be the assumption that the current economic expansion will continue uninterrupted,” the comptroller said.
Board member David Jones noted that New York City caps its debt ratio at 15%.
“We’re inching pretty far above that and obviously, going into an uncertain future,” Jones said. “It does give us concern that we’re going to have to make actual trade-offs between delivery of service and covering debt.”
The MTA on Oct. 10 issued $900 million of Series 2018C transportation bond anticipation notes, priced competitively. The authority issued them as fixed-rate, tax-exempt notes with an all-in true interest cost of 2.294% and a final maturity of Sept. 1, 2021.
“It was a highly successful transaction,” said deputy finance director Marcia Tannian. “We had eight successful bids, but on each tranche we had about 100 bids on one and 70 bids on the other.”
Nixon Peabody LLP and D. Seaton and Associates were bond counsel. Public Resources Advisory Group and Backstrom McCarley Berry & Co., LLC were co-financial advisors.
